The Venezuelan Economy: Bitcoin To The Rescue

It is popular knowledge that the Venezuelan economy is passing through some very difficult times. As the nation struggles to find stability in it’s economy, can Bitcoin play any role at all?

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It is popular knowledge that the Venezuelan economy is passing through some very difficult times. With an inflation of 275% in 2015, and IMF forecast of a far worse situation in 2016 as the nation struggles to find stability in it’s economy. Can Bitcoin play any role at all? If so, how big a role can the Cryptocurrency play in the given situation?

Venezuela has been in the news lately, but not for very positive reasons. The country faces severe social and economic problems, such as high inflation (the highest in the world), shortage of basic goods in the markets, high criminality and media censorship. With the nation’s currency highly devalued in the parallel market, its citizen are turning to other currencies for financial safety albeit in both the right and the wrong ways.

Cointelegraph caught up with the Randy Brito, Founder of BitcoinVenezuela.com, a non-profit bitcoin information site that has carried the responsibility of not just creating bitcoin awareness in Venezuela, but also in educating citizens on the fundamentals and inherent values of the cryptocurrency.

There is no resistance

Randy believes that Bitcoin can become a genuine saviour of the Venezuelan economy for a number of reasons.

Like several other governments across the globe, the Venezuelan government has not come out clearly to either adopt or prohibit the use of bitcoin, Randy acknowledges this fact and goes on to add that the government’s posture speaks of a silent approval. He believes this is because the government censors negative statements towards bitcoin, and because a reasonable number of those in government and their relations use Bitcoin. For example, Guido Ochoa (jnr), who happens to be the son of a member of parliament, bought out the Bitcoin mining company Hashfast after it declared bankruptcy in the United States.

Another thing that has encouraged government tolerance of bitcoin is that most Venezuelan government officials prefer to conceal their wealth, and the semi-anonymous nature of bitcoin suits them very well.

Bitcoin as a viable replacement

Randy says that he hopes that Bitcoin will replace the long running demand for foreign currencies like the US dollar, due to the loss of value of the Venezuelan Bolivar, for people seeking a safe haven for their wealth. Randy says:

“The people need to know that Bitcoin can be better and more flexible and a good way to store wealth. The only problem with the Bitcoin is that it is not very liquid, as transactions are usually irreversible. That notwithstanding, Bitcoin can be informally accepted as it is not prohibited in Venezuela, just like the dollar credit cards received by merchants, the bitcoin can be received also and used even for international purposes.”

Randy also noted that the majority of bitcoin users within the country at the moment employ such service as a means to move their money out of the country.

No exchanges, no problem

On some of the hitches that Bitcoin has experienced so far in Venezuela, Randy points out the lack of exchanges, stating that there is only one registered bitcoin exchange within the country, Surbitcoin. This is likely due to the absence of modern technology within the nation’s banking sector. Problems with obsolete banking infrastructure leave Venezuela’s finance sector well exposed to fraud, problems which are often exacerbated by industry insiders.

The absence of local exchanges has not stopped the growth of the bitcoin market in Venezuela. In Randy’s words:

“The Bitcoin market in Venezuela is indeed big and growing at a fast rate. The absence of exchanges have seemingly gone unnoticed as most bitcoin miners within the country trade informally with people they can trust, basically for reasons of privacy, as they seek to conceal their source of wealth from the public.”

Bitcoin will empower the people

Randy insists that the Bitcoin intervention could be the ‘bailout’ that the Venezuelan economy has long waited for.

He says that the transparent nature of the bitcoin blockchain transactions has the power and appeal to draw huge volume out of the currency black market, which will eventually cause a ripple effect within other aspects of the currency and products market. He says:

“If Bitcoin is used not just for money laundering, but for everyday trading for goods and services, the government will lose the power it has over the people such that the government will not be able to create inflation which happens to be an avenue to steal the wealth from the people. If basic items such as food, medicine, clothing and other regular services can be purchased or paid for in bitcoins, this will strengthen the cryptocurrency.”

What we preach

Randy explained that the philosophy of his bitcoin evangelism is in getting the people really educated on the actual nature and value of Bitcoin as a currency and not just another internet tool to search for ‘free money’.

He says that the people need to understand that Bitcoin can be used to cover their basic needs, and that once they understand its true nature, everyone could use according to their own need. The current trend is, people go directly from knowing nothing about Bitcoin, or just doing 'pay to click' earnings, to mining, never employing it for services and products.

Mining is profitable in Venezuela because of the very low power price in the country (even free power/electricity). People use the few thousand dollars income they have (per year quota for travel, 100$ online quota, or black market acquired dollars), to buy at least one miner and earn Bitcoins from it, to trade or to save.

According to Randy, he does this and works on making even more with the help of collaborators working as a non-profit organisation, holding talks across the nation and hosting activities on social media.

He also appreciates the high level of reception that him and his team gets from the general public as reflected social media participation.

He also says that they will continue teaching cryptocurrency fundamentals, and how they can earn bitcoins by selling their products or services either locally or internationally. He hopes to encourage a realisation that they can work and make money (whether online or offline), rather than relying on some non-venturing endeavours which have been encouraged by bad governance of the last two decades.